How to Apply for Unsecured Business Loan

There are three types of loans secured, partial secured and unsecured. Secured loans require collateral, partial some security while unsecured without security.

Unsecured business loans need no collateral such as lines of credit or credit cards. Regular bank loans require extensive documentation while unsecured loans are more flexible.

They are much easier to get because they don’t require company or personal assets. The downside is that interest rates are higher than other forms of credit.

Considerations

The borrow needs to determine the type of loan they want. The loan could be partial, secured or unsecured. Other considerations are collateral, down payment and assets.
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Conventional Mortgage Loan

A conventional mortgage loan attracts higher down payment expected upfront. The loans equity builds rapidly because of higher down payment. Some lenders request down payment of 20 to 25%.

However private mortgage insurance is not mandatory in all cases. In the case of a company or individual not meeting the down payment then mortgage insurance is needed.

The lender will authenticate that the down payment is owned by the borrower. The source of the down payment must be money saved by the borrower.

Creditworthiness

Lenders are willing to negotiate terms and conditions of the loan. However there are standard guidelines to every loan. Some banks require a non-refundable fee and may include stiff penalties if not repaid on time.

The creditworthiness of the borrower is determined by the lender. The qualification, debt to income ratio and amount of money to meet obligation are also considered by the lender.

They also consider the amount of money needed to service the debt, monthly gross income earned by borrower. The downside is bankruptcy or in extreme cases home foreclosure.

Disadvantage of Conventional Mortgage

Low credit score borrowers face loan term fees and higher interest rates. The interest rate increases if closing cost of loan is included.

Conventional loans sometimes come with adjustable rate loans. This invariable cause’s fluctuation in monthly payments.

•         Loan term fees

•         Higher interest rates

•         Adjustable rate loans

•         Fluctuation in monthly payments

Unsecured Business Loans

Unsecured business loans does not require collateral. However the borrow must meet certain conditions such as income and credit rating.

How to Obtain Unsecured Business Loan

To obtain an unsecured loan the applicant needs to meet the banks representatives. They will determine your eligibility, creditworthiness. The main advantage of unsecured loans is the lack of collateral.

To apply put together bank account information and complete an application form. Provide contact information, social security number and bank information.

•         Meet the banks representatives

•         Put together bank account information

•         Complete an application form

•         Provide contact information

•         Social security number

•         Bank information

Disadvantages of Unsecured Business Loans

The main disadvantage is the high interest rate. This is because of the higher risk factor for lenders. Businesses tend to pay more over a period than secured loans.

The high interest also causes higher individual loan payments. It is harder to qualify for an unsecured loan than a secured one.

Like regular loans any default will affect your business credit rating. Although the loan is unsecured a lender might go to court for redress.